FAQs on Paying Staff

I’ve received numerous calls lately regarding compensating employees for overtime and under what would be considered “extenuating circumstances,” such as power outages or natural disasters.

Topic One: Disaster Pay

Many AEs report that natural disasters over the past year forced their offices to close for a few days or weeks. Some paid their staff anyway, while others did not. What’s the law?

Under normal circumstances, employees who are unable to report to work (because of illness, for example) are allowed to use other paid time off (e.g. sick days) to be compensated for their time. If an employee has exhausted all of his or her paid time off and does not report to work when the office is open, then the time off is unpaid.

But when there’s a natural disaster, like the floods that hit the Northwest this summer, who gets paid if the association office must unexpectedly close or if roads and train routes are impassable, making it impossible for employees to get to the office?

The answer to this question comes partly from the law and partly from your association policy. The law requires only that employees be paid for hours worked, so if your office is officially closed due to a natural disaster, you are under no legal obligation to pay your employees.

If the office is not officially closed but employees cannot or do not come in to work, then they need to use their vacation or sick time in order to be paid. Again, an association can choose to pay employees who cannot make it to the office in the aftermath of a natural disaster, but legally it doesn’t have to.

Although allowing employees to work from home (so they may be compensated) is also an option for some associations, when there are widespread outages, this is not always feasible.

“We had an ice storm about 10 years ago that shut down power for more than ten days in our town, along with [causing] very significant damage to trees and property,” says Cindy Butts, association executive for the Maine Association of REALTORS®. “No one could work from home or the office at the time and we didn’t even discuss not compensating everyone for the days the entire area was shut down.”

Pennsylvania Association of REALTORS®’ CEO Dave Phillips does not have a formal disaster policy, but rather has an unwritten “do the right thing” policy, which allows his staff to “balance the needs of the association and the needs of the staff.” When his area was affected by flooding in 2011, not all staff was impacted in the same way. Those who could report to work did so; others worked from home.

If a natural disaster stretches into weeks, as was the case with Hurricane Katrina, some smaller associations might not have the luxury of paying for employees during a prolonged office closure. A 2005 Mercer study of companies affected by Hurricane Katrina indicated that some small companies were able to pay employees who could not report to work, while others did not have the ability to do so. About three-fourths of the companies found additional means of payment, such as donations, relief grants, and no-interest loans.

Put Compensation in your disaster plan

If you don’t already have this aspect of compensation addressed in your employee handbook or your association’s crisis plan, flesh out a policy now, before disaster strikes. Here are some points to consider:

Will you pay employees if the office is unexpectedly officially closed?

Will you pay full or partial salary?

Will you pay employees who are unable to make it to the office if it is open?

Topic Two: Overtime Pay

I’m also frequently asked about paying employees who take it upon themselves to work overtime.

Now, we know that nonexempt workers are eligible for overtime and exempt workers aren’t. Your employee handbook should include a policy that specifies not only who is a nonexempt employee but that nonexempt employees must obtain approval before working overtime. Unfortunately, though, this written policy does not get you off the hook for paying employees who work the extra hours without first obtaining approval; employees are to be paid for all hours worked, period.

According to the Department of Labor, “... Overtime pay earned in a particular workweek must be paid on the regular pay day for the pay period in which wages were earned.” If an employee works overtime hours without prior approval, I recommend that you meet with the employee and provide him or her with a copy of your overtime policy. If the abuse continues, follow the progressive disciplinary steps (e.g., verbal warning, written warning, probation, suspension, termination). Finally, an employee and employer cannot agree to “waive” overtime. If you learn that an employee has worked overtime and has not recorded it or has not requested to be paid, you must still pay for the time worked.

According to an August 2004 article in the Society for Human Resource Management magazine titled “Avoid ‘Off-the-Clock’ Work Claims,” plaintiffs can prove that an employer was aware of their overtime hours by indicating: 1) a supervisor or manager was in a position to observe the work; 2) the work the employee performed was too much to be completed within scheduled hours; and 3) there was a pattern of extra work performed and the employer’s acquiescence in the matter.

Although you might not be able to control employees’ seeking overtime, you can be mindful not to encourage it by refraining from sending messages to your nonexempt employees after hours. Such messages might imply that an immediate, after-hours response is desired. If you explicitly request that they respond, this could be considered “hours worked.” Be sure that your nonexempt staff knows that the office policy is that there is no need to respond immediately to after-hours messages. Better yet, instead of hitting “send,” jot a reminder to yourself and speak with them in the morning.

Paying staff for event attendance

There are several other issues of overtime that I hear from AEs. One is paying staff when they’re at an event

If employees are required to attend an event (be it in the evening, on a weekend, etc.), they should be paid for the time that they are in attendance. If employees are not required to attend, inform them that they may attend but that attendance is optional. If they choose to voluntarily attend, then they don’t have to be paid.

Paying staff for travel

When it comes to travel time, things aren’t so black and white. This category raises the most questions and, regrettably, is the most complex to answer, because it depends on the type of travel involved. An employee’s commute time to and from work doesn’t have to be paid.

Employees who attend lectures, meetings, or training programs do not have to be compensated if the following four criteria are met:

The activity is outside normal working hours.

The activity is voluntary.

The activity is not job related.

Only the activity taking place and no other work is being performed.

Nonexempt employees who are traveling away from home for business purposes should be paid their regular work hours during their time of travel, even if they are traveling on a weekend. For example, if an employee works 9 a.m. to 5 p.m. Monday through Friday, then any time traveled on the weekend that falls between the hours of 9 a.m. and 5 p.m. are compensable.

But here’s where it gets confusing: If nonexempt employees are traveling after 5 p.m. on a weekend, those hours do not have to be paid, since the travel occurred after the employee’s normal scheduled time of 5 p.m. In short, the weekend travel is compensable only when it mirrors a weekday workday.

To further complicate matters, time spent traveling to an airport or train station (or other means of public transportation) is not compensable. How-ever, once the employee arrives at the airport or station and is waiting for the means of transportation, the waiting time must be paid. Administratively, it’s easier to remember to pay employees for any travel time between their arrival at the airport and their destination.

Then there’s the issue of “on-call” staff. “On call” typically applies to nonexempt help desk staff who are on call to assist with computer system malfunctions, MLS system problems, or member inquiries. The tighter the availability restrictions placed on on-call employees, the more time you’ll likely have to pay them for. For instance, if employees are required to stay at or near the workplace and cannot use their time freely, then they are considered as “engaged to wait” or “on duty” and must be paid. Employees who provide you with a phone number where they can be reached, as needed, and are allowed the freedom to do as they want until summoned are paid only for the time that they are called to address a specific issue or problem.

Note: State employment laws vary.

Disaster Plan Examples and Resources

Whether and how you pay staff in the event of a crisis or disaster is one component of your association’s disaster plan. Don’t have a written plan? Check out these REALTOR® association samples and resources.

What Happens If . . .

The 9 scenarios of crisis exercise from the Massachusetts Association of REALTORS® (below) covers what to consider in the event of government investigation, a visit from the IRS, an arrested of your president, and more. The document doesn’t give you all the answers (every association has different needs and capabilities), but it raises essential questions you should have the answers to in the event of a crisis.

9 scenarios: Planning Best for the Worst—MAR Crisis Management Scenarios

INSTRUCTIONS—Discuss the assigned Scenario below with your group and create a bulleted “Plan of Action”. Be sure to deal with the following and be prepared to report to full group:

Handling Member Response

Handling Staff Response

Handling Media Response

Handling Office Needs

Contacts Needed

Money Issues

And please end with “How we could have planned ahead”

Scenario #1—Government Investigation

It’s a bright Tuesday afternoon and the CEO and much of the senior staff are at a Local Association golf tournament. Two men enter MAR office, show badges indicating that they are from the Justice Department and want to speak with someone about possible Anti-Trust violations. The receptionist rings for a Group Leader who invites the men to her office and learns that the men are investigating a Policy Board meeting where it is alleged that the group discussed a member firm’s “unusual” fee schedule, thereby setting in motion possible boycott or restraint of trade complaint by one of the Policy Board directors. The Government Agent makes assurance that the questions are only preliminary so there is no need to call the CEO at this time…but would like some further information. How should this situation best be handled.

Scenario #2—Visit from Friendly IRS Agent

It’s about 4 PM on Friday afternoon before a long weekend and a woman enter MAR office claiming to be an agent of the Internal Revenue Service. CEO and Admin VP are out of the office (coincidentally meeting with the Accounting firm) but receptionist rings for Accounting Director who meets the woman at the front desk. Woman again claims to be an IRS agent and says that she simply would like to see MAR’s latest two financial statements…and wondered if she could use an area of the building to review them. How should this situation best be handled.

Scenario #2B— ——A member of the public walks off the street, wanting to see MAR’s Form 990…which contains financial information including compensation. How should we respond?

Scenario #3—Fire!

It’s 2 AM and MAR’s CEO receives a call that a major fire is engulfing the MAR office. CEO quickly jumps in car and arrives at MAR to see fire trucks, police cars and a very burning building. Fire Chief says that early reports indicate that the blaze began in the upstairs kitchen but quickly spread to the computer room. At this point, it appears that the building may be a total loss. Soon, a few other staff begin to arrive, including the Membership Manager who shakes her head and says that there had not been time to backup records during the past week. Further, an accounting specialist mentions that a stack of about 100 checks had been left in a file on top of her desk the previous evening. Another staff person blurts out that he noticed that the coffee pot smelled a bit burnt when he passed the kitchen area the previous afternoon. How should this situation best be handled.

Scenario #4—President Arrested

MAR President Jones calls MAR and, in rushed voice, says that armed policemen were at his front desk and he suspected that he would be arrested. Conversation ends abruptly. CEO is able to reach the President’s spouse at home, who is unaware of any problem…and now is panicking. CEO then calls the President’s office who report that the police have taken him away, apparently charging him for robbing one of their listed homes. President also received the state Code of Ethics award in the previous year. How should this situation best be handled?

Scenario #5—An Unfortunate Cruise

Some 500 members are in the middle of the Atlantic Ocean at MAR’s Convention aboard the cruise ship SS Minnow. Three days into the cruise (and the night before the installation), the President-Elect is playing shuffleboard and has a heart attack…and goes into a coma. The ship docks in Nassau and an emergency meeting of the Leadership Team is called to determine the best course of action regarding the banquet and continuation of the Association. How should this situation best be handled?

Scenario #6—EVP/CEO Arrested

A police car pulls up to MAR’s office and policemen ask receptionist to see the EVP/CEO…who comes out and is promptly placed in cuffs and arrested. Receptionist hears a charge of embezzlement of funds and calls the Admin VP. How should this situation best be handled?

Scenario #7—The Terrorist

Receptionist receives a call from a man who claims to have placed a bomb at MAR headquarters. How should this situation best be handled?

Scenario #8—The Hurricane

MAR is expecting 1,000 people at its annual Convention, to be held in Bermuda. About 100 (including Leadership Team and some senior staff) have arrived on day before Convention is to begin, when weather reports at 10 AM predict that the path of a hurricane over the Atlantic has changed and the storm’s eye now is expected to be directly over Bermuda by noon tomorrow. The forecaster does mention that there is a large margin of error due to the erratic nature of this storm…and it’s possible that it could entirely miss the island. As a result, the Governor has not declared an emergency and the hotel management urge continuation of the Convention. How should this situation best be handled?

Scenario #9—Regulatory Bombshell

Congress has ruled that banks may enter the real estate business and within just six months most of the major real estate firms in Massachusetts have been purchased by large banks. Meanwhile, the Massachusetts Bankers Association have formed a Real Estate Chapter of their association (quickly adding a Code of Ethics and others services similar to the REALTOR organization)…and most of the new bank owners have said that their real estate licensees will join that Chapter instead of the REALTOR Association. It is estimated that MAR will stand to lose about 45% of its membership over two years, unless something is done. How should this situation best be handled?

** Crisis Planning: Nine Steps to Developing a Plan

Daniel M. Sutherland, ePRO, RCE, MLS and operations director of the Outer Banks Association of REALTORS®, N.C., shares with AEs his experience developing a disaster plan that helped his associations and its members weather a direct hit from Huricane Irene in 2011.

“Many of our members’ homes and offices were extensively damaged,” says Sutherland, “with one major area being isolated for over a month; however, the Association office, which is three blocks from the Atlantic Ocean and one mile from the Albemarle Sound, received little damage. Some of our success could be based on luck, but a lot of our success was based on developing a good plan, communicating with our members, and incorporating lessons learned into the plan for future crises.”

At the REALTOR® Association Resource Exchange: Sample disaster plans from the Mississippi, Virginia, and Wilmington Regional Associations of REALTORS®.